International Journal of Economics and Financial Research ISSN(e): 2411-9407, ISSN(p): 2413-8533 Vol. 4, Issue. 9, pp: 274-283, 2018 URL: http://arpgweb.com/?ic=journal&journal=5&info=aims Academic Research Publishing Group *Corresponding Author 274 Original Research Open Access Awareness and Challenges of Stock Market in Bhutan Chimi Wangmo Honors College, Gaeddu College of Business Studies, Gedu, Bhutan Phuntsho Choden Assistant Professor, Thimphu Bhutan Shelly Daly * Associate Professor,International Business; Plaster School of Business & Entrepreneurship, Fulbright Scholar, Faculty Advisor Honor Society, Study Abroad Lindenwood University / 209 South Kingshighway, St. Charles, USA Rinchen Dorji Assistant Professor, Gedu Bhutan, Gaeddu College of Business Studies, Royal University of Bhutan Abstract This paper investigates the awareness level and challenges confronting the Bhutanese Stock market and brokers to ascertain its development potential within this emerging economy. The study was carried out using both quantitative and qualitative techniques and is mainly based on primary sources of data where a semi-structured questionnaire was designed to collect data from the public, brokers and officials of Royal Securities Exchange of Bhutan Limited (RSEBL). The findings have revealed that more than half of the public are aware of the existence of the RSEBL and they are not highly knowledgeable about trading on the Stock market or its benefits. The study also found that the respondents are interested in investing in the Stock market but lacked knowledge on investment avenues. Furthermore, the findings have revealed the challenges and limitations which hinder the development of a more robust stock market in Bhutan. The major challenges faced by RESBL and its brokers are lack of participation from public and companies, low frequency of trade and liquidity problem. The study suggests that the public should be educated on the benefits of investing in the stock market as well as on the procedures of investing in stocks. In addition, RSEBL should encourage more companies to be listed in the stock exchange. This study draws awareness to the existence of the Bhutan stock market as a potential investment opportunity. Furthermore, it sheds light on the challenges emerging markets face in establishing a viable and effective exchange. Keywords: Stock market; Bhutan; Emerging market. CC BY: Creative Commons Attribution License 4.0 1. Introduction According to Musonera and Safari (2008) a stock market is an organized market for the trading of stocks, bonds and other financial securities. According to Singh (1997), “Stock markets basically play a big role to accelerate economic growth and financial sector development by motivating, promoting, attracting domestic savings and increasing quality of investment”. Well-functioning and efficient stock markets signify growth and development of the economy, as it provides a mechanism through which companies can raise capital for expansion purposes by seeking and issuing securities/stocks and bonds. They help release idle funds for investment because they generally provide higher rates of return than alternative investments. An active stock market provides a strong impetus for economic growth. To develop the capital market in the country, the Royal Government of Bhutan establish RSEBL in August,1993 and officially opened for trading on 11th October,1993 as a non-profit making organization (http://www.rsebl.org.bt/rseb#intro). Currently, RSEBL is the only stock market in Bhutan. It is one of the world’s smallest stock exchange markets with market capitalizations of around 375 million dollars and 21 listed companies as of February, 2015. To promote the stock market, RSEBL has come up with five brokerage firms: BOB Securities Limited (Bank of Bhutan Limited), RICB Securities Limited (Royal Insurance Corporation of Bhutan), BNB Securities Limited (Bhutan National Bank Limited), BDB Securities Limited (Bhutan development Bank Limited) and Drukyul Securities Broker Private Limited, which have contributed to the growth of the capital market of Bhutan. According to the RSEBL report of 2015, the market capitalization increased from Ngultrum (Nu.) 10,012.54 million during the year 2010 to Nu. 23,995.05 in 2015. Capital markets play a specific role in any economy. However, the Bhutanese capital market seems to have made negligible contribution towards the growth of the stock market. In Bhutan share trading is still at its infant stage. According to RSEBL Annual Report 2015, the numbers of shareholders decreased from 62,991 in 2014 to 62,555 in 2015. The decrease in the number of shareholders account was mainly due to secondary market transactions. Stock markets have played a significant role in the investment process in developed countries such as the United States, the United Kingdom, Japan and others. However, the development of stock markets in developing countries